When dealership's sales crashed, service cushioned the impact

Dan Roseland, Sonoma Chevrolet: "The world stopped turning for us. [But] people started fixing their cars, and we were ready."

In late 2008, Dan Roseland wondered whether his Sonoma Chevrolet dealership would survive.

Business already had started slowing down during the first quarter of that year at his store in the small but popular tourist town in northern California. Roseland sensed the service business would be increasingly important as consumers held on to their vehicles.

He set out to remake his service department. The key? The staff, says Roseland, 53.

He hired a new service manager with a track record of the highest customer satisfaction scores in the region. Good technicians followed. All brought loyal customers with them.

In May 2008, gasoline prices hit $5.13 a gallon in northern California, and sales, which largely had consisted of big vehicles in Sonoma's rural market, cratered.

"The world stopped turning for us," Roseland said. But "people started fixing their cars, and we were ready."

In the past 18 months, Sonoma Chevrolet's service revenue increased by one-third. By contrast, overall dealership revenue dropped nearly 40 percent during the last three years.

Roseland, who previously worked for General Motors for 14 years, about half of that time in fixed operations, calls the upswing a combination of luck and strategic thinking.

It kept the store in business.

"If our service had not started going up then, I wouldn't be here," he said. "Those extra service dollars kept me open. God, it was brutal."

Returning to solid profits

Roseland bought the dealership in late 2006 after the previous owner died in a plane crash. The store already was struggling.

The store went from revenue of $11.3 million and sales of 398 new and used vehicles in 2007 to revenue of $8.3 million and vehicle sales of 324 in 2008. Business slipped even further in 2009, to revenue of $7 million and sales of 232 units.

During that dark downturn, the dealership lost money during some months, violating Roseland's "no red ink" rule.

For all of 2008 and 2009, the business essentially broke even, Roseland said -- a little in the black on an operating basis but a little in the red after taxes and depreciation.

In 2010, Roseland expects the dealership to be solidly profitable. Revenue was up almost 4 percent through July.

The turmoil in the rest of the industry actually ended up helping the service surge at Roseland's dealership. The local Ford store closed in fall 2009, leaving Sonoma Chevrolet as the only franchised dealership in the town of 12,000.

Roseland already had been proclaiming that his dealership would service all makes and models. His new mechanics had worked at import stores and knew how to fix other brands, even European models. "That has been a big part of it," he said. "Here, it's the land of imports."

With advertising dollars scarce, Roseland got creative about getting the message out. When the Ford store went out, he painted Sonoma Chevrolet's windows, facing a local highway, with the words "Ford customers welcome."

"A lot of those people did come in to let us have the opportunity to try to earn their business," Roseland said. "We made sure we got it."

Cost cutting, too

As he overhauled the service department, Roseland slashed overall costs. He laid off employees, reducing the total staff from 28 to 14. Everybody remaining took a pay cut, and health insurance was cut.

The daily cleaning service was cut to once a week. Employees had to pitch in to keep the store tidy, and Roseland led the way, dumping the trash and cleaning toilets. The service technicians set out their own trash and kept their stalls cleaner.

"It took drastic measures to make it, and it was awful tough," said Roseland, who worked 80-hour weeks during the time.

The discipline has paid off with better results this year. Roseland says he hopes to restore some of the cuts within the next year.

And he isn't complacent about the rejuvenated service department. Sonoma Chevrolet's absorption rate -- the percentage of dealership overhead covered by service and parts revenue -- went from about 60 percent in 2007 to 75 percent in 2009.

Roseland is shooting for 80 percent this year. His goal is to reach a 100 percent absorption rate, though he estimates that will take at least another two years. The growing number of customers driving up to Sonoma Chevrolet's service bays makes that goal possible. "The best sound at a car dealership right now is an air wrench," Roseland said.